| Summary of Significant Accounting Policies | Note 2—Summary of Significant Accounting Policies
Basis of Preparation
The consolidated financial statements are prepared in accordance
with the International Financial Reporting Standards, or IFRS, as
issued by the International Accounting Standards Board, or IASB,
and as adopted by the European Union, or EU.
The accounting policies applied when preparing the consolidated
financial statements are described in detail below and are applied
for all entities. Unless otherwise stated under the section
“Changes in Accounting Policies and Disclosures” below,
these policies have been applied consistently to all years
presented. Significant accounting estimates used when exercising
the accounting policies are described in Note 3.
Our consolidated financial statements have been prepared under the
historical cost convention, apart from certain financial
instruments that are measured at fair value at initial
recognition.
Changes in Accounting Policies and Disclosures
New and Amended Standards and Interpretations
As of January 1, 2018, the Company has adopted IFRS 9,
“Financial Instruments”, which introduces a new
impairment model for financial assets measured at amortized cost
based on an expected credit loss model, which currently applies to
the Company’s bank deposits, trade receivables and deposits.
The implementation of the impairment model under IFRS 9 had no
impact on the consolidated financial statements.
At December 31, 2017, €17.4 million of trade payables and
€6.3 million of other payables were combined and presented as
a single amount of trade payables and other payables under current
liabilities in the consolidated statements of financial position.
In connection with adoption of IFRS 9, and in order to separate
financial liabilities from other payables, we have from December
31, 2018, presented other payables separately from trade payables
in the consolidated statements of financial position. Comparative
figures have been reclassified to reflect the change in
presentation. The adoption of IFRS 9 had no other impact on the
consolidated financial statements.
Further, the Company has adopted IFRS 15, “Revenue from
Contracts with Customers”, which establishes a single,
comprehensive framework for revenue recognition, based on a
five-step model, which applies to the Company’s licensing
agreements with multiple activities. IFRS 15 was adopted as of
January 1, 2018 using the “retrospective method with the
cumulative effect of initially applying this standard recognized at
the date of the initial application”. The adoption of IFRS 15
had no impact on the consolidated financial statements.
Going Concern
The Company’s Board of Directors has, at the time of
approving the consolidated financial statements, a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Thus, we continue
to adopt the going concern basis of accounting in preparing the
financial statements.
Recognition and Measurement
Assets are recognized in the consolidated statements of financial
position when it is probable, as a result of a prior event, that
future economic benefits will flow to us and the value of the asset
can be measured reliably.
Liabilities are recognized in the consolidated statements of
financial position when we have a legal or constructive obligation
as a result of a prior event, and it is probable that future
economic benefits will flow from us and the value of the liability
can be measured reliably.
On initial recognition, assets and liabilities are measured at cost
or at fair value, depending on the classification of the items.
Measurement subsequent to initial recognition is affected as
described below for each financial statement item. Anticipated
risks and losses that arise before the time of presentation of the
consolidated financial statements and that confirm or invalidate
affairs and conditions existing at the consolidated statements of
financial position date are considered at the time of recognition
and measurement.
Income is recognized in the consolidated statements of profit or
loss when earned, whereas costs are recognized by the amounts
attributable to the financial year.
Basis of Consolidation
The consolidated financial statements include our parent company,
Ascendis Pharma A/S, and all enterprises over which the parent
company has control. We control an enterprise when we are exposed
to, or have rights to, variable returns from our involvement with
the enterprise and have the ability to control those returns
through our power over the entity. Accordingly, the consolidated
financial statements include Ascendis Pharma A/S and the
subsidiaries listed in Note 11.
Consolidation Principles
The consolidated financial statements comprise the Company, and its
subsidiaries at December 31, 2018. Subsidiaries, which are
enterprises where we have control at the balance sheet date, are
fully consolidated from the date upon which control is transferred
to us. They are deconsolidated from the date control ceases.
We re-assess
•
The contractual arrangement(s) with the other vote
holders of the enterprise
•
The Group’s voting rights and potential voting
rights
•
Rights arising from other contractual arrangements
All intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between our group
enterprises are eliminated in full on consolidation.
Subsidiaries and our associate apply accounting policies in line
with the Company’s accounting policies. When necessary,
adjustments are made to bring the entities’ accounting
policies in line with those of the Company.
An associate is an entity over which we have significant influence
over financial and operational decisions but where we have neither
control nor joint control. The Company’s associate is
accounted for using the equity method. Under the equity method, the
associate is initially recognized at cost. Thereafter, the carrying
amount of the investment is adjusted to recognize changes in the
Company’s share of net assets of the associate since the
acquisition date.
The consolidated statements of profit or loss includes the
Company’s share of result after tax and non-controlling
After application of the equity method, we determine whether it is
necessary to recognize an impairment loss related to the associate.
Accordingly, at each reporting date, we determine whether there is
objective evidence that the associate is impaired. If there is such
evidence, we calculate the amount of impairment as the difference
between the recoverable amount of the associate and its carrying
value. Any impairment loss is recognized within share of
profit/(loss) of associate in the consolidated statements of profit
or loss.
Foreign Currency
Functional and Presentation Currency
Items included in the consolidated financial statements are
measured using the functional currency of each Group entity.
Functional currency is the currency of the primary economic
environment in which the entity operates. The consolidated
financial statements are presented in Euro (EUR), which is also the
functional currency of the parent company.
Translation of Transactions and Balances
On initial recognition, transactions in currencies other than the
individual entity’s functional currency are translated
applying the exchange rate in effect at the date of the
transaction. Receivables, payables and other monetary items
denominated in foreign currencies that have not been settled at the
balance sheet date are translated using the exchange rate in effect
at the balance sheet date.
Exchange rate differences that arise between the rate at the
transaction date and the rate in effect at the payment date, or the
rate at the balance sheet date, are recognized in profit or loss as
financial income or financial expenses. Property, plant and
equipment, intangible assets and other non-monetary
Currency Translation of Group Enterprises
When subsidiaries or associates that present their financial
statements in a functional currency other than EUR are recognized
in the consolidated financial statements, their statements of
profit or loss are translated at average exchange rates. Balance
sheet items are translated using the exchange rates at the balance
sheet date. Exchange rate differences arising from translation of
foreign entities’ balance sheet items at the beginning of the
year to the balance sheet date exchange rates as well as from
translation of statements of profit or loss from average rates to
the exchange rates at the balance sheet date are recognized in
other comprehensive income. Similarly, exchange rate differences
arising from changes that have been made directly in a foreign
subsidiary’s equity are recognized in other comprehensive
income.
Business Combinations
Newly acquired or newly established subsidiaries are recognized in
the consolidated financial statements from the time of acquiring or
establishing such enterprises. Time of acquisition is the date on
which control of the enterprise is actually acquired.
When acquiring new enterprises over which we obtain control, the
acquisition method is applied. Under this method, we identify
assets, liabilities and contingent liabilities of these enterprises
and measure them at fair value at the acquisition date.
Restructuring costs are only recognized in the pre-acquisition
The acquisition price for an enterprise consists of the fair value
of the consideration paid for the acquired enterprise. Costs that
are attributable to the acquisition of the enterprise are
recognized in the consolidated statement of profit or loss when
incurred.
The excess of the consideration transferred, the amount of any
non-controlling
Goodwill is subject to annual impairment test. Impairment is
calculated as the difference between the recoverable amount of the
cash-generating unit that the goodwill relates to, and it’s
carrying amount. Any impairment loss is recognized in the
consolidated statement of profit or loss in a separate line
item.
Revenue
Our revenue is primarily generated from collaboration- and license
agreements. Further, we also generate revenue from development
services under development and commercialization agreements.
Additionally, revenue is generated from feasibility studies for
potential partners to evaluate if our TransCon technologies enables
certain advantages for their product candidates of interest. Such
feasibility studies are often structured as short-term agreements
with fixed fees for the work that we perform.
With reference to “Changes to accounting policies and
disclosures”, the Company has adopted IFRS 15, “Revenue
from Contracts with Customers”, effective from
January 1, 2018. Thus, until December 31, 2017 revenue
was recognized when it was probable that future economic benefits
would flow to us and these benefits could be measured reliably.
Further, revenue recognition required that all significant risks
and rewards of ownership of the goods or services included in the
transaction had been transferred to the buyer, and that we retained
neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods or
services sold.
From January 1, 2018, upon adoption of IFRS 15, when we enter
into contract with customers, we assess the goods and/or services
promised in the contract and identify distinct performance
obligations. A promise in the agreement is considered a distinct
performance obligation if both of the following criteria are
met:
•
the customer can benefit from the goods or service
either on its own or together with other resources that are readily
available to the customer (i.e. the goods or service is capable of
being distinct); and
•
the entity’s promise to transfer the goods or
service to the customer is separately identifiable from other
promises in the contract (i.e. the promise to transfer the goods or
service is distinct within the context of the contract).
Under collaboration-, license, and other agreements that contain
multiple promises to the customer, the promises are identified and
accounted for as separate performance obligations, if these are
distinct. If promises are not distinct, we combine those goods or
services with other promised goods or services until we identify a
bundle of goods or services that is distinct.
The transaction price in the contract is measured at fair value and
reflects the consideration we expect to be entitled to in exchange
for those goods or services. In the transaction price, variable
consideration including milestone payments, is only included to the
extent that it is highly probable that a significant reversal in
the amount of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is
subsequently resolved.
The transaction price is allocated to each performance obligation
according to their stand-alone selling prices and is recognized
when control of the goods or services are transferred to the
customer either, over time or at a point in time.
Revenue is stated net of value added tax, duties, etc. collected on
behalf of a third party, and discounts. Usually the payment terms
are within 1-2
The transition to IFRS 15 had no impact on recognition and
measurement of revenue.
Research and Development Costs
Our research and development costs consist primarily of
manufacturing costs, preclinical and clinical study costs, salaries
and other personnel costs including pension and share-based
payment, the cost of facilities, the cost of obtaining and
maintaining our intellectual property portfolio, and the
depreciation of assets used in research and development
activities.
Research costs comprise costs incurred at the early stages of the
drug development cycle from the initial drug discovery and are
recognized in the consolidated statement of profit or loss when
incurred.
A development project involves a single product candidate
undergoing a series of studies to illustrate its safety profile and
effect on human beings prior to obtaining the necessary approval
from the appropriate authorities. Due to the risk related to the
development of pharmaceutical products, we cannot estimate the
future economic benefits associated with individual development
projects with sufficient certainty until the development project
has been finalized and the necessary market approval of the final
product has been obtained. As a consequence, all development costs
are recognized in the consolidated statement of profit or loss in
the period to which they relate. Development costs also comprise
manufacturing costs related to validation batches, or process
performance qualification batches, on late-stage development
projects.
General and Administrative Expenses
General and administrative expenses comprise salaries and other
personnel costs including pension and share-based payment, office
supplies, cost of facilities, and depreciation and amortization
related to administrative activities.
General and administrative expenses are recognized in the
consolidated statement of profit or loss in the period to which
they relate.
Share-based Incentive Programs
Share-based incentive programs under which board members, employees
and external consultants have the option to purchase shares in
Ascendis Pharma A/S (equity-settled share-based payment
arrangements) are measured at the equity instrument’s fair
value at the grant date.
The cost of equity-settled transactions is determined by the fair
value at the date of grant using the Black-Scholes valuation model.
The cost is recognized together with a corresponding increase in
equity over the period in which the performance and/or service
conditions are fulfilled, the vesting period. The fair value
determined at the grant date of the equity-settled share-based
payment is expensed on a straight-line basis over the vesting
period for each tranche, based on our best estimate of the number
of equity instruments that will ultimately vest. No expense is
recognized for grants that do not ultimately vest.
Where an equity-settled grant is cancelled, it is treated as if it
vested on the date of the cancellation, and any expense not yet
recognized for the grant is recognized immediately. This includes
any grant where non-vesting
Where the terms and conditions for an equity-settled grant is
modified, we recognize as minimum the services measured at the
grant date fair value over the vesting period. Additionally, we
re-measure
If a new grant is substituted for the cancelled grant and
designated as a replacement grant on the date that it is granted,
the cancelled and new grants are treated as if they were a
modification of the original grant, as described in the previous
paragraph.
Any social security contributions payable in connection with the
grant or exercise of the warrants are recognized as incurred.
The assumptions used for estimating the fair value of share-based
payment transactions are disclosed in Note 6.
Finance Income and Expenses
Finance income and expenses comprise interest income and expenses
and realized and unrealized exchange rate gains and losses on
transactions denominated in foreign currencies.
Interest income and interest expenses are stated on an accrual
basis using the principal and the effective interest rate. The
effective interest rate is the discount rate that is used to
discount expected future payments related to the financial asset or
the financial liability in order for the present value of such
asset or liability to match their carrying amount.
Income Taxes
Tax for the year, which consists of current tax for the year and
changes in deferred tax, is recognized in the consolidated
statement of profit or loss by the portion attributable to the
profit or loss for the year and recognized directly in equity or
other comprehensive income by the portion attributable to entries
directly in equity and in other comprehensive income. The current
tax payable or receivable is recognized in the balance sheet,
stated as tax computed on this year’s taxable income,
adjusted for prepaid tax.
When computing the current tax for the year, the tax rates and tax
rules enacted or substantially enacted at the balance sheet date
are used. Current tax payable is based on taxable profit or loss
for the year. Taxable profit or loss differs from net profit or
loss as reported in the consolidated statements of profit or loss
because it excludes items of income or expense that are taxable or
deductible in prior or future years. It also further excludes items
that are never taxable or deductible.
Deferred tax is recognized according to the balance sheet liability
method of all temporary differences between carrying amounts and
tax-based
Deferred tax liabilities are recognized on all temporary
differences related to investments in our subsidiaries, unless we
are able to control when the deferred tax is realized, and it is
probable that the deferred tax will not become due and payable as
current tax in the foreseeable future.
Deferred tax is calculated based on the planned use of each asset
and the settlement of each liability, respectively.
Deferred tax is measured using the tax rates and tax rules in the
relevant countries that, based on acts in force or acts in reality
in force at the balance sheet date, are expected to apply when the
deferred tax is expected to crystallize as current tax. Changes in
deferred tax resulting from changed tax rates or tax rules are
recognized in the consolidated statement of profit or loss unless
the deferred tax is attributable to transactions previously
recognized directly in equity or other comprehensive income. In the
latter case, such changes are also recognized in equity or other
comprehensive income.
Deferred tax assets, including the tax base of tax loss carry
forwards, are recognized in the balance sheet at their estimated
realizable value, either as a set-off
Intangible Assets
Goodwill
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognized for non-controlling
Property, Plant and Equipment
Property, plant and equipment is measured at cost less accumulated
depreciation and impairment losses. Cost comprises the acquisition
price, costs directly attributable to the acquisition and
preparation costs of the asset until the time when it is ready to
be put into operation.
Subsequent costs are included in the carrying amount of the asset
or recognized as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the assets
will flow to us and the costs of the items can be measured
reliably. All repair and maintenance costs are charged to the
consolidated statement of profit or loss during the financial
periods in which they are incurred.
Plant and equipment acquired for research and development
activities, which are expected to be used for research and
development activities for more than one year, are capitalized and
depreciated over the estimated useful life as research and
development costs.
If the acquisition or use of the asset involves an obligation to
incur costs of decommissioning or restoration of the asset, the
estimated related costs are recognized as a provision and as part
of the relevant asset’s cost, respectively.
The basis for depreciation is cost less estimated residual value.
The residual value is the estimated amount that would be earned if
selling the asset today net of selling costs, assuming that the
asset is of an age and a condition that is expected after the end
of its useful life. The cost of a combined asset is divided into
smaller components, with such components depreciated individually
if their useful lives vary.
Depreciation commences when the asset is available for use, which
is when it is in the location and condition necessary for it to be
capable of operating in the manner we intend.
Depreciation is calculated on a straight-line basis from the
following assessment of an asset’s expected useful life:
Process plant and machinery 5 - 10 years
Other fixtures and fittings, tools and
equipment 3 - 5 years
Leasehold improvements 3 - 5 years
The useful life for plant and equipment used in specific
development activities, reflects the estimated time of the relevant
development project.
Depreciation methods, useful lives and residual amounts are
re-assessed
Property, plant and equipment are written down to the lower of
recoverable amount and carrying amount, as described in the
“Impairment” section below.
Depreciation, impairment losses and gains and losses on disposal of
property, plant and equipment are recognized in the consolidated
statement of profit or loss as research and development costs or as
general and administrative expenses, as appropriate.
Impairment
Property, plant and equipment and finite-lived intangible assets
are reviewed for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable. The
recoverable amount of goodwill is estimated annually irrespective
of any recorded indications of impairment.
An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for
which there are largely independent cash inflows, or
cash-generating units, which for goodwill represent the lowest
level within the enterprise at which the goodwill is monitored for
internal management purposes. Prior impairments of non-financial
Receivables
Receivables comprise deposits, trade receivables, and other
receivables, which are separately presented in the consolidated
statements of financial position.
With reference to “Changes to accounting policies and
disclosures”, the Company has adopted IFRS 9,
“Financial Instruments”, effective as of
January 1, 2018. Thus, until December 31, 2017, deposits
and trade receivables were classified as loans and receivables,
constituting financial assets with fixed or determinable payments.
Receivables were initially recognized at their fair value, and
subsequently measured at amortized cost.
From January 1, 2018, receivables (excluding receivables
related to VAT and other indirect tax receivables) are classified
as financial assets at amortized cost, as these are held to collect
contractual cash flows and thus give rise to cash flows
representing solely payments of principal and interest. Trade
receivables are initially recognized at their transaction price and
subsequently measured at amortized cost. Deposits are initially
measured at their fair value and subsequently measured at amortized
cost.
Other receivables comprise VAT and other indirect tax receivables,
and thus not classified as financial assets, are measured at cost
less impairment.
The carrying amount of receivables usually equals their nominal
value less provision for impairments.
Prepayments
Prepayments comprise costs relating to a future financial period.
Prepayments are measured at cost.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash and demand deposits with
financial institutions. Cash and cash equivalents are measured at
amortized cost.
Allowance for Expected Credit Losses on Financial
Assets
Financial assets comprise receivables (excluding receivables
relating to VAT and other indirect tax receivables) and cash and
cash equivalents.
In connection with adoption of IFRS 9, the Company has implemented
a new impairment model for financial assets measured at amortized
cost based on an expected credit loss model. Until
December 31, 2017, provision for bad debts on financial assets
was determined on the basis of an individual assessment of each
receivable and recognized using an allowance account. From
January 1, 2018 provision for bad debts is determined on the
basis of a forward-looking expected credit loss (ECL”) model.
ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and the cash flows that we
expect to receive, discounted at an approximation of the original
effective interest rate.
For receivables, we will apply a simplified approach in calculating
ECLs. Therefore, we will not track changes in credit risk, but
instead we will assess a loss allowance based on lifetime ECL at
each reporting date. Lifetime ECLs will be assessed on historical
credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
For cash and cash equivalents, ECLs are assessed in two stages. For
credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are
assessed for credit losses that result from default events that are
possible within the next 12-months (“12-month
Shareholders’ Equity
The share capital comprises the nominal amount of the parent
company’s ordinary shares, each at a nominal value of DKK 1,
or approximately €0.13. All shares are fully paid.
Share premium reserve comprises the amounts received, attributable
to shareholders’ equity, in excess of the nominal amount of
the shares issued at the parent company’s capital increases,
reduced by any expenses directly attributable to the capital
increases.
Foreign currency translation reserve includes exchange rate
adjustments relating to the translation of the results and net
assets of our foreign operations from their functional currencies
to our presentation currency. The accumulated reserve of a foreign
operation is recognized in the consolidated statement of profit or
loss at the time we lose control, and thus cease to consolidate
such foreign operation. The foreign currency translation reserve is
an unrestricted reserve that is available to be distributed as
dividends to the Company’s shareholders.
Reserve for share-based payment represents the corresponding
entries to the share-based payment recognized in the consolidated
statement of profit or loss, arising from our warrant programs.
Retained earnings or accumulated deficit represents the accumulated
profits or losses from the Company’s operations. A positive
reserve is available to be distributed as dividends to the
Company’s shareholders.
Leases
Leases of property, plant and equipment, where we have
substantially all of the risks and rewards of ownership, are
classified as finance leases. Other leases are classified as
operating leases.
No finance leases were in place at December 31, 2018 or
December 31, 2017. Lease payments on operating leases are
recognized on a straight-line basis in the consolidated statement
of profit or loss over the term of the lease.
Total commitments under operating leases is disclosed in note
16.
Trade Payables
Trade payables including accrued expenses are measured at amortized
cost applying the effective interest method to the effect that the
difference between proceeds and nominal amount is recognized in the
consolidated statement of profit or loss as a financial expense
over the term of the liability.
Other Payables
Other payables comprise payables to public authorities, and
short-term employee benefits payable within one year. Other
payables are measured at their net-realizable
Contract Liabilities
Contract liabilities comprise deferred income from collaboration
agreements and license agreements, where consideration received do
not match the individual deliverables with respect to amount and
satisfied performance obligations. Deferred income typically arises
from up-front up-front up-front
Deferred income is recognized as revenue in the consolidated
statement of profit or loss when the relevant performance
obligation, to which the deferred revenue relates, is
satisfied.
Cash Flow Statement
The cash flow statement shows cash flows from operating, investing
and financing activities as well as cash and cash equivalents at
the beginning and the end of the financial year.
Cash flows from operating activities are presented using the
indirect method and calculated as the profit or loss adjusted for
non-cash
Cash flows from investing activities comprise payments in
connection with acquisitions, development, improvement and sale,
etc. of intangible assets, property, plant and equipment, and group
enterprises.
Cash flows from financing activities comprise changes in the share
capital of Ascendis Pharma A/S and related costs.
The effect of exchange rate changes on cash and cash equivalents
held or due in a foreign currency is presented separately from cash
flows from operating, investing and financing activities.
Cash flows in currencies other than the functional currency are
recognized in the cash flow statement, using the average exchange
rates.
Cash and cash equivalents comprise cash at hand and deposits with
financial institutions.
Any restricted cash included in the balance of cash and cash
equivalents is presented as an additional disclosure in the cash
flow statement.
Segment Reporting
We are managed and operated as one operating and reportable
segment. No separate operating segments or reportable segments have
been identified in relation to product candidates or geographical
markets. Accordingly, except for entity wide disclosures, we do not
disclose segment information on business segments or geographical
markets.
Basic EPS
Basic Earnings per Share, or EPS, is calculated as the consolidated
net income or loss from continuing operations for the period
divided by the weighted average number of ordinary shares
outstanding.
Diluted EPS
Diluted earnings per share is calculated as the consolidated net
income or loss from continuing operations for the period divided by
the weighted average number of ordinary shares outstanding adjusted
for the dilutive effect of share equivalents. If the consolidated
statement of profit or loss shows a net loss, no adjustment is made
for the dilutive effect, as such effect would be anti-dilutive.
New International Financial Reporting Standards Not Yet
Effective
The IASB has issued, and the European Union has adopted, a number
of new or amended standards, which have not yet become effective.
Therefore, these new standards have not been incorporated in these
consolidated financial statements. Our financial reporting is
expected to be affected by such new or improved standards to the
extent described below.
•
In January 2016, the IASB issued IFRS 16
“Leases”. The standard was endorsed by the EU in 2017
and will be effective for annual periods beginning on or after
January 1, 2019 and replaces the current IAS 17
“Leases”. IFRS 16 requires, with a few exceptions,
lessees to rec |
